EU investigation delays scheme

The start of a cooperation scheme involving 350 European Union (EU) container ships will be delayed by an EU competition investigation.

The start of a cooperation scheme involving 350 European Union (EU) container ships will be delayed by an EU competition investigation.

The start of a cooperation scheme involving 350 European Union (EU) container ships will be delayed by an EU competition investigation, the German initiator of the plan said. But it was still hoped the scheme could start later this year if EU competition clearance is given, Hermann Neemann, who is organising the Baltic Max Feeder scheme. 'I am still optimistic, I have not buried the plan,' he said.

The EU Commission, the bloc's executive arm, said last Friday it had opened an investigation into anti-competitive business practices by Baltic Max Feeder, in which ship owners will share the cost of laying up idle vessels.

The scheme, aimed to start in early 2010, involves small-size ships carrying up to 1,400 standard twenty-foot equivalent units (TEUs) cargo containers involved in shipping or feedering between large deepsea ports and smaller harbours.

The scheme had been seeking 120 million euros (S$237 million) of bank loans and 60 million in contributions from shipping companies, said Mr Neemann, chief executive of German tax adviser Anchor Steuerberatung.

This would be used to pay 1,500 euros a day plus bank interest to owners laying up ships.

But the EU Commission said it was concerned the scheme may be aimed at reducing shipping market capacity and pushing up charter prices.

'This is not the case, we are not seeking to raise charter rates,' said Mr Neemann. 'The EU Commission has told us it sees a relevance to cartel law but we are optimistic that it is compatible with competition rules.'

The Baltic Max Feeder scheme was aimed at helping European ship owners lay up unneeded container vessels as ship charter prices have slumped with the economic slowdown, he said, adding that about 40 ship owners largely from Germany with 350 ships had given initial commitment to participate.

Container trade is measured in TEUs.

A 1,000-TEU ship is currently earning only around US$3,900 a day against US$12,500 a day in late 2007 because of a collapse in demand, one German shipbroker said. 'This has caused extreme pain for shipowners, latest estimates are that some 580 container ships worldwide are laid up without work,' the shipbroker said.

Marc Pauchet, shipping analyst with London-based consultants Maritime Strategies International, said there may be competition concerns among shipping lines which pay for smaller container ships to transport cargo at the start and end of inter-continental container transport.'Due to the sheer concentration of supply of European feeder ships in German hands, a gathering of all German supply under one umbrella would constitute what operators are not afraid to call a 'monopoly' where feeder ship owners would manage global European supply in concert to bring rates up,' Mr Pauchet said.

'More than 70 per cent of European feeder tonnage belong to German owned ships and could qualify for the Baltic Max Feeder scheme, depending on the size and scope the instigators of the scheme intend to settle for,' he added.

Initial legal advice was that the scheme would receive approval from the EU, Mr Neemann said. 'The banks must still come to a conclusion about whether they will finance Baltic Max, the decision had not been made.'

Banks were likely to await the outcome of the Commission's investigation, Mr Neemann added.